The shares fell 16.2% to £24.01, tumbling to the bottom of the FTSE 100, as the lender said an overhaul of its home credit division was likely to weigh on profits for the rest of the year.
The company said the impact of the reorganisation on collections, sales penetration and customer retention was heavier than expected.
Having previously predicted a £15 million impact on collections in the first half of the year, Provident Financial said the cost was now likely to hit £40 million. Credit issued for the five months to May was meanwhile £37 million below the same period last year.
'I am disappointed to report higher-than-expected operational disruption from the migration of the home credit business to a new operating model,' said Peter Crook, chief executive of Provident Financial.
The news represents a blow to fund managers Neil Woodford, Mark Barnett and Alexander Darwall, who are among the biggest backers of the stock.
Woodford's successor at Invesco Perpetual, Mark Barnett, counts the stock as the fourth largest holding in his Invesco Perpetual Income, High Income and UK Strategic Income funds, and the fifth biggest stock in his Edinburgh (EDIN) investment trust.
Citywire AA-rated Alexander Darwall meanwhile has an even higher conviction holding, with 7.5% of his Jupiter European Opportunities (JEO) investment trust held in the company.
Liberum analyst Justin Bates reiterated his 'sell' rating on the news. 'We had been concerned about rising impairments and customer attrition in the consumer credit division as the new model was implemented,' he said. 'The transition appears to have been more painful than expected. The sheer speed of the deterioration has taken us by surprise, particularly after a reassuring first quarter trading update.'
But Shore Capital analyst Gary Greenwood, who rates the shares a 'buy' was more sanguine. 'With the restructuring now largely complete and with management now focused on improving collections performance we would expect the drag from this item to reduce going forwards, albeit it may take longer for sales to recover as management attempts to rebuild the franchise under the new operating model,' he said.
'As such we expect downgrades to outer year estimates to be somewhat smaller.'